TREASURY

Chris Leslie: What about the 3.3 million people—one in 10 of the existing workforce—who pay their national insurance and tax and whose jobs are linked to UK exports to the EU? Does he agree that leave campaigners should not just cross their fingers and dismiss reality and that Members on both sides of the House have a duty to spell out the fact that leaving the EU would put real jobs at real risk?

Steven Baker: Does the Government welcome the opportunity to bring forward actual data without the need to project forward 14 years using techniques that have proved to be inaccurate every six months?

David Gauke: As I said, HMRC has gone through the data and will provide it to the ONS. It is for the ONS to decide the timing, but I have drawn the House’s attention to what it has said.
Returning to the Treasury analysis, it compares one scenario with other scenarios, and all three possible scenarios for leaving the EU would leave this country poorer than we otherwise would be.

Chloe Smith: Is it not the case that this Government’s lifetime ISA could help to produce, at maximum rates, a home deposit of up to £50,000, and, even at lower rates of savings, a deposit enough for a terraced home in Norwich costing £120,000

George Osborne: To be frank, representations are not going to be enough with some of these jurisdictions. That is why we want international agreement to a blacklist that jurisdictions will go on if they do not comply with the norms that we are establishing on transparency, exchange of information and the like. Once they are on the blacklist, they are subject to penalties and punitive action—sanctions, if you like—so that it is clear that they cannot carry on doing business in the way they have been. If the whole world comes around on that—there was welcome support for this British-promoted concept at the G20 last week in Washington—so that we get that blacklist and that punitive action, I think that we will help solve this problem.

Byron Davies: Will the Chancellor update the House on any discussions he has had for a potential city deal for the Swansea Bay city region, and on what he can do to drive growth and create jobs in south-west Wales, particularly in my Gower constituency

Rushanara Ali: Analysis by the House of Commons Library, including that on the 2016 Budget, shows that, cumulatively, 86% of savings in the period between 2010 and 2020 will come from women’s pockets. What has the Chancellor got against women

Chloe Smith: In the Budget, the Chancellor outlined measures on tax avoidance and evasion to bring in about £12 billion. How much more does he expect to bring in from the measures announced since, which we all welcome, to make every business in this land pay its fair share

Alan Mak: All 31 local firms that have reached the final of my Havant small business awards will benefit from the Government’s corporation tax cut. Will the Chancellor join me in congratulating all the finalists and confirm that the Government will continue to support small businesses across the country

John Bercow: Order. I am sorry to disappoint colleagues, but we must now move on to the statement.

LIBYA

Philip Hammond: With permission, I shall update the House on the current situation in Libya and on what the Government are doing to support the new Libyan Government of National Accord.
Yesterday, I visited Tripoli; it was the first time that a British Foreign Secretary had done so since 2011. The fact that the visit was able to take place is a positive sign of the progress made in recent weeks, including in the security situation in and around the capital. During my visit, I met Prime Minister Sarraj and members of the Presidency Council in the naval base that has been the headquarters of the Government of national accord since they relocated to Tripoli on 30 March. I welcomed their commitment to representing all the Libyan people and the progress they have made in establishing the GNA as a Government of the whole of Libya.
I underlined to Prime Minister Sarraj the UK’s support for the GNA as the only legitimate Government of Libya. They have the endorsement of the Libyan political dialogue and the majority of members of the House of Representatives. I believe the Libyan people want them to succeed. We look forward to the House of Representatives completing its formal vote of endorsement in line with its obligations under the Libyan political agreement.
I was encouraged to hear from Prime Minister Sarraj and his Ministers about the steps they are taking to assume control of Government Ministries in Tripoli. After five years of conflict following the overthrow of Gaddafi, the Libyan people are weary of fighting and eager for peace. They want a Government who will start to address the many challenges Libya faces. It is important that the international community works in partnership with the GNA as they continue to consolidate their position and take forward their work to meet the needs of Libyan citizens across the country.
In my meetings, I emphasised the need to keep up momentum on the political process and to deliver practical progress on the ground. I was encouraged to hear that a clear plan was being developed to address some of the immediate challenges: delivering security, tackling Daesh, restoring basic public services, countering people-trafficking, restarting oil production, and getting the economy back on track.
We agreed that delivering security was fundamental to improving the day-to-day lives of the Libyan people and creating an environment for economic reactivation. The security agenda must, of course, be owned and led by the GNA, but the UK, along with other European nations, stands ready to respond to requests from the Libyan Government for assistance in training the Libyan armed forces in order to improve their effectiveness in providing security and in the fight against Daesh. Prime Minister Sarraj and I agreed that we should continue to work closely to establish what those training and technical support requirements were, and what role, if any, the international community could play in helping to meet them.
A number of Members have speculated in recent days that the Government might be on the cusp of committing British troops to Libya in a combat, or combat support,  role. I am pleased to have the opportunity to clarify the situation. I am clear about the fact that there is no appetite in Libya for foreign combat troops on the ground. We do not anticipate any requests from the GNA for ground combat forces to take on Daesh or any other armed groups, and we have no plans to deploy troops in such a role. I will, of course, keep the House informed of any plans that we develop in the future in response to requests from the Libyan Government, but the type of mission that we currently envisage would be focused on providing training and technical support, away from any front-line operations.
The Libyan economy is suffering from the effects of years of conflict and the impact of low oil prices. It is clear that the Presidency Council is focused on the immediate need to alleviate the pressures on ordinary Libyans, including those arising from the current squeeze on liquidity in the banking system, the shortfall in power generation and the shortage of basic commodities, as well as the slightly longer-term challenge of ensuring the effective functioning of the key state financial institutions—the Central Bank of Libya, the National Oil Corporation and the Libyan Investment Authority—and the challenge of rebuilding oil production and export capacity. As I said to Prime Minister Sarraj, the UK stands ready to provide whatever technical assistance it can with those issues, in all of which British companies have relevant experience and expertise to share.
As for the migration threat, there is clearly an urgent need to tackle the challenges arising from irregular migration and the organised criminal and terrorist networks that facilitate so much of it. In my discussions, I highlighted our desire to work in close partnership with the GNA to make progress on that issue, including progress in tackling the people-smugglers and traffickers. As part of that initiative, we should look at creating a package of support that could include extending the EU’s naval Operation Sophia and building the capacity of the Libyan coastguard to support, and eventually take over, the operation, but clearly such a package would be implemented only at the invitation of the Libyan Government.
Yesterday I announced that Britain would allocate £10 million for technical support to the GNA in this financial year, to be delivered through the conflict, security and stability fund. The package will support the strengthening of political participation, economic development, and the delivery of capacity in security, justice and defence. We will work closely with the GNA to ensure that that support is channelled into the areas where it can have the greatest effect.
After years of conflict in Libya, the formation of the Government of national accord and their arrival in Tripoli have the potential to mark a real turning point in Libya’s fortunes. The challenges facing the GNA should not be underestimated, and delivering the security and economic development that will allow the Libyan people to realise their country’s huge potential will not be an easy task to fulfil, but the UK, together with many of our international partners, stands ready to assist. It is in all our interests that Prime Minister Sarraj and his Government are able to re-establish security, reactivate the economy, and defeat Daesh in Libya  as quickly as possible. I commend this statement to  the House.

Philip Hammond: It is very easy to sit on the Opposition Benches hurling stones, but I am afraid that the world is not a neat and tidy place, and we have to deal with the situations that present themselves. The hon. Gentleman talks about the humanitarian work, but I remind him that, when we intervened in Libya in 2011, it was to prevent an imminent genocide in Benghazi and that that successful intervention saved countless thousands of lives. Libya is a rich country, and we should not forget that——$70-odd billion-worth of Libyan assets outside the country are currently frozen by a UN Security Council resolution. This is about getting the Government in place and then releasing those assets so that the Government can function. Libya is not a country that  needs humanitarian assistance in the conventional sense. It needs technical support with good governance, and help to get into a position where we can release its assets to it to enable it to function.
The hon. Gentleman mentioned the British ambassador. I join him in paying tribute to the work of our ambassador, who is currently based in Tunis. He came with me yesterday to Tripoli and it is his fervent desire, as it is mine and Prime Minister Sarraj’s, to reopen the British embassy in Tripoli as soon as we are able to do so. Unfortunately, the location of our current buildings in Tripoli is in a rather less secure part of town, so I cannot promise that that will be imminent, but we will keep the matter under constant review and do it as soon as we can.
The hon. Gentleman asked whether any training mission to Libya would take place on Libyan soil, and I have to say to him, yet again, that there is no training mission, there is no putative training mission and there has been no request for a training mission. I speak as a former Defence Secretary when I say that, if there is a request for such a mission, the military will clearly want to ensure that it is undertaken with the minimum risk possible to UK personnel. Therefore, their first preference would be to do it here, their next preference would be to do it somewhere in the region and their third preference would be to do it in Libya, if it is safe to do so. I assure him that we will spare no effort in trying to ensure that any support we do give to the Libyans will be delivered in a way that represents the least possible risk to the British forces delivering it.

Philip Hammond: Yes, and yesterday I offered Prime Minister Sarraj technical support in relation to the central bank, the national oil company and the Libyan Investment Authority. It is a tribute to Libyan resilience and ingenuity that international partners recognise the figures who have continued to run those institutions throughout this period of chaos over the past few years as technically competent and well-motivated—they have been doing a good job. Prime Minister Sarraj has now brought the competing appointees—the eastern and the western chairmen of each of those institutions—together to work together and to seek to forge consensus on how the institutions can go forward as truly national institutions on a collaborative basis.

Edward Leigh: The Foreign Secretary and the shadow Foreign Secretary speak in grandiloquent terms of Prime Minister Sarraj, a Government of national accord and even a House of Representatives. Any member of the British public watching “News at Ten” last night would have seen our Foreign Secretary and the Prime Minister of national accord holed up in a naval base, unable to leave because they control none of the country. Apparently, they now control three ministerial buildings in a country the size of western Europe. Can we have a reality check, please? Can the Government at last realise that their bid to undermine authoritarian leaders such as Saddam Hussein,  Gaddafi, who had a deal with the Italian Government to return migrants, and now Assad has just involved the region in death and destruction? Can we just learn the lessons, try and find a strongman, and do what the Chairman of the Home Affairs Committee wants—and what we all want—and find a way of creating some kind of safe haven for migrants to be returned?

Philip Hammond: The most effective step to broaden out the legitimacy of the Government will be the vote in the House of Representatives on the endorsement of the Government. The HOR is committed by the Libyan political agreement to do that, and we hope that it will happen very soon. On the question of our European partners, it is inevitably true that, for 26 of the other 27 EU states, excluding Ireland, migration is at the top of the agenda. It falls to me to urge them, as I urged the Chairman of the Select Committee, to accept that, if we want to make progress on the matter, we must try to set this in a context that makes sense not just to us, but to the Libyans.

John Bercow: Order. A further 21 hon. and right hon. Members are seeking to catch my eye, and I am naturally keen to accommodate all of them. Brevity will assist me in doing so.

Johnny Mercer: I thank my right hon. Friend for his statement. I know that I might be a lone voice, but I urge him to guard against parliamentary approval for every military intervention we undertake, which is out of keeping with an enemy that moves fast and that we need to go up against.  May I ask the Foreign Secretary about a distinct strategy specifically to target Daesh, separate from but complimentary to the wider diplomatic peace strategy? One can reinforce the other, but if we wait for the perfect political settlement before we start, we will be waiting forever.

Philip Hammond: That is a good question, but the timetable will have to be determined by what is happening on the Libyan side. At the discussion last night, we were clear that we needed to work up a European Union package. There was mention of Turkey earlier, and the way in which the EU has dealt with Turkey on migration has not escaped the Libyans’ notice, so there will be need to be a comprehensive proposal. As soon as it is appropriate to make the Libyan Government aware of what such a package might look like, the ball will then be in their court to decide whether they wish to request support.

POINT OF ORDER

FARM PRODUCE (LABELLING REQUIREMENTS)

BANK OF ENGLAND AND FINANCIAL SERVICES BILL [LORDS]

Consideration of Bill, as amended in the Public Bill Committee
New Clause 12

Appointment of Financial Conduct authority chief executive

Harriett Baldwin: By popular demand, this is what the letter states:
“Dear Andrew,
During the passage of the Bank of England and Financial Services Bill, we have considered the role of the Treasury Select Committee (TSC) in scrutinising the appointment of the Chief Executive of the Financial Conduct Authority (FCA).
This scrutiny is important and welcome. I will therefore ensure that appointments to the Chief Executive of the FCA are made in such a way to ensure the TSC is able to hold a hearing, after the appointment is announced but before it is formalised. Should the TSC recommend—”
this is more exciting news—
“in its report that the appointment be put as a motion to the whole House, the government will make time for this motion and respect the decision of the House.
Additionally—”
it does not stop there—
“I will seek, in a future Bill, to make a change to the legislation governing appointments to the FCA CEO to make the appointee subject to a fixed, renewable 5-year term. This would not apply to Andrew Bailey, who I recently announced as the new head of the FCA, but would first apply to his successor.
I believe that these changes will reinforce the Treasury Committee’s important scrutiny role.”

Harriett Baldwin: I am sure that the shadow Chancellor will welcome Government new clause 12. The Government will consider the earliest possible opportunity very carefully following today’s sitting.
As the letter states, should the Treasury Committee follow the pre-commencement hearing with a report recommending that the appointment be put as a motion to the whole House, the Government will make time for that motion and, should it result in a vote, they will respect the decision of the House. We will also seek an opportunity to alter the legislation governing appointments to the FCA chief executive officer, to make the appointee subject to a fixed, renewable, five-year term. I can confirm that Andrew Bailey, the new CEO of the FCA, has been appointed to a five-year term that can be renewed, so the agreed process will first apply to his successor. The agreement is the right way to reinforce the crucial scrutiny role of the Treasury Committee.

Harriett Baldwin: We tabled our new clause on Thursday and, as I have said, there have been further discussions with the Chair of the Treasury Committee. I am delighted to be able to announce the result of those discussions today.
I also want to take a moment to address the question of dismissals of the FCA chief executive. I can confirm that the Government do not have the power, expect in very limited circumstances, to dismiss the chief executive of the FCA during his or her term of office. I refer the House to paragraph 4 of schedule 1ZA to the Financial Services and Markets Act 2000, which applies to the chair and the external members, as well as to the CEO, and states:
“The Treasury may remove an appointed member from office…on the grounds of incapacity or serious misconduct, or…on the grounds that in all the circumstances the member’s financial or other interests are such as to have a material effect on the extent of the functions as member that it would be proper for the person to discharge.”
The lawyers are clear that the only reasons the Treasury can dismiss an FCA chief executive are incapacity, serious misconduct and conflicts of interest. I hope that offers the House considerable reassurance.

Richard Burgon: I rise to speak to amendments 6 and 7 in my name and that of my hon. Friends, but I first want to turn to new clause 1 and Government new clause 12 on the appointment of the FCA chief executive.
I came to the House ready to speak in support of new clause 1, which seeks to give the Treasury Committee a formal role in the appointment of the chief executive of the FCA. In my view, new clause 1 is better placed to guarantee the competence and independence of the regulator than the new clause in the name of the Chancellor, which in our original reading of it, did too little to change the status quo. New clause 12 was tabled in response to the new clause tabled by the Chair of the Treasury Committee, the right hon. Member for Chichester (Mr Tyrie). We had a similar debate in Committee on an amendment about the appointment process for the chief executive of the Prudential Regulation Authority.
Since 2008, Select Committees have routinely held pre-appointment hearings for a number of public appointments, and some candidates have not been approved. The coalition Government developed the scrutiny agenda when the Chancellor agreed in 2010 to the Treasury Committee having a power of veto over appointments to the Office for Budget Responsibility. The Public Accounts Committee has a veto over the appointment of the Comptroller and Auditor General. Appointments to the Monetary Policy Committee and the Financial Policy Committee of the Bank of England are made by the Chancellor of the Exchequer, and are then subject to a confirmation hearing by the Treasury Committee. The Treasury Committee has powers over the chair and board members of the Office for Budget Responsibility, an arrangement that the Chancellor told the Treasury Committee he would put in place
“because I want there to be absolutely no doubt that this is an independent body”.
The Minister will be aware that, when it examined the proposals for the future FCA in 2013, the Treasury Committee made a number of recommendations on the accountability of the new body to Parliament, including that the legislation should provide that the chief executive of the FCA be subject to pre-appointment scrutiny by the Treasury Committee. I recall that the Treasury Committee was disappointed by the Government response, particularly in view of the deficiencies in the accountability mechanisms for the Financial Services Authority.
As we have heard, the view of the Treasury Committee was set out in the Treasury Committee Chair’s letter to the Chancellor of the Exchequer on 26 January, following the appointment of the current PRA chief executive, Andrew Bailey, to be the next leader of the FCA. In that letter, the right hon. Gentleman set out his Committee’s view that it should have a veto over the appointment and dismissal of the chief executives of both the FCA and the PRA. Indeed, the letter said that the FCA’s chair, John Griffith-Jones, told the Committee, when he met its members on 20 January, that there was merit in that proposal.
In Committee, I flagged up this matter and said it would be helpful to know whether the Chancellor had shared his thinking on such calls to extend pre-appointment hearings and the power of veto to those two positions. Now we have had his reply. It was in the Minister’s ring binder. As she said, it was “exciting” to hear the contents of it, and we got a fantastic insight into the fireside exchanges within the Government. Labour Members believe that the Treasury Committee should have greater authority over the future of financial regulation in this country.
On Government new clause 12, it is unclear what would happen in the period between the appointment of the chief executive and him or her appearing before the Committee. Would they be left in limbo, or would they in fact be settling into their new post? Would we be disappointed—in practice, would it simply be business as usual, with the Treasury Committee not given the power that we all believe it deserves? We do not believe that simply requiring any new chief of the FCA to appear before the Committee within three months of appointment delivers anything particularly new. It is reasonable to expect that any new postholder would appear before the Committee within that timeframe in any event, whether or not that appearance was codified.
With regard to new clause 12, however, I am pleased to note the exciting news—the Minister herself has called it that, as have I—that by means of the Chancellor’s letter the Government have communicated that they accept the broad thrust of the proposals put forward by the Chair of the Treasury Committee. I also note and welcome the Minister’s commitment today to introduce the relevant legislation, in her own words, sooner rather than later. I politely suggest that the changes be introduced in the Finance Bill shortly—that is an opportunity not to be missed.
I turn to Labour’s amendments 6 and 7, containing measures that we have retabled after they were discussed in Committee, and new clause 13, in the name of my hon. Friend the Member for Bishop Auckland (Helen Goodman). Each of those measures, in its own way, addresses the crucial issue of the need for transparency and openness in the Bank of England. The National Audit Office’s power to investigate the Bank has been subject to discussion at each stage of the Bill in both this House and the other place. The Comptroller and Auditor General was clearly concerned about proposals in the Bill that would have allowed the court of directors a veto over the new powers for the NAO. I am pleased to say that there has been clear progress on the issue as the Bill has proceeded through both Houses; in particular, the veto was removed in the other place. As hon. Members will recall, in response the Government proposed a memorandum of understanding between the Bank and the National Audit Office; I understand the draft of that has been welcomed by both sides.
Opposition amendments 6 and 7 seek to extend and clarify the powers of the comptroller to inquire into the Bank’s success in achieving its policy objectives. We believe that that does not encroach beyond the boundaries of questioning the merits of policy decisions, but would assist the National Audit Office in ascertaining whether the Bank is delivering value for money.

Mark Field: I have a brief question on amendment 6. Although I accept that transparency and openness are the spirit of the age and we cannot necessarily move entirely against that—[Laughter.] We do our level best some of the time. I am sure that the Treasury will be at the vanguard of this. Does the hon. Gentleman accept that, at times of great difficulty, when there are issues about the stability or functioning of the UK’s financial banking system, it would be appropriate not just for the Treasury Committee but for the Treasury itself to have some say in suggesting when openness should not be fully fledged? The safeguards that he has put in place in the amendment refer only to the Treasury Committee; does he not see that there might be instances when Ministers might rightly have concerns about issues of stability that should be protected from open transparency at least for a time, although there could then be a move to make the minutes and other things more open at some future point, once the particular threat had passed?

Andrew Tyrie: Of course my hon. Friend the Member for North East Somerset (Mr Rees-Mogg), as a great and learned constitutional expert, will explain this apparent contradiction to the House in, I hope, a lengthy disquisition in a few minutes’ time.
I really am trying to conclude, but I have just one more point. It is essential in a 21st century democracy that appointees to an increasing number of quango positions—this was the general point I said I would  refer to earlier—should be forced to explain their actions before Parliament and also should feel accountable to Parliament. To achieve that, the means of their appointment and their protection from dismissal are relevant, and that is why a change such as this can offer us something.
Over decades, successive Governments have offloaded their responsibilities to quangos, leaving the public with the sense that nobody is ultimately democratically accountable for anything. I believe that accountability for decisions that were formerly taken directly by Ministers, but now sit with unelected appointees in quangos, needs thorough scrutiny and cross-examination, and that is what we have been trying to do in the Treasury Committee over the past few years.
The agreement with the Chancellor is a sizeable step in the right direction. Of course, in an ideal world, I would like access to the statute book to write exactly what, on behalf of the Treasury Committee, I feel should be on it. However, we live in the real world, and I am very happy with this exchange of letters and grateful to Ministers for their agreement. I shall not press new clause 1 to a Division today.

Helen Goodman: Obviously, in the new landscape of the City, the head of the Financial Conduct Authority holds an extremely important post, and the question of who fills that post is therefore vital. I am extremely pleased about the change that was agreed this afternoon and announced by the Minister at the Dispatch Box. It opens up the process, it gives the Treasury Committee a proper role, and it will, we hope, reinforce the independence of the person concerned.
Another person with considerable independence is, of course, the Comptroller and Auditor General. I am pleased, too, that we have moved away from the idea that the court should decide which part of the Bank’s homework the Comptroller and Auditor General should be allowed to mark. There is clearly a parallel with the C&AG’s role in respect of the BBC. On Second Reading, we asked Treasury Ministers to publish the memorandum of understanding. They have now published it, and it is an extremely useful document, which sets out, in advance, an agreed framework for the C&AG’s remit. That will prevent ad hockery, and will also prevent both the reality and the possible perception of political interference, or inappropriate avoidance of scrutiny of certain areas of the Bank’s work.
New clause 13, which stands in my name, would make the Bank of England subject to the Freedom of Information Act 2000. It seems to me that, as the Bank is a public authority which is fulfilling public policy purposes, the case for covering it does not really need to be made; it is the case against its being covered that needs to be made. The Minister made some important points about why she was not minded to accept the new clause, and I want to respond to what she said. She singled out three areas in particular: monetary policy, financial operations, and private banking.
I am not entirely sure of all the details of the 2000 Act, but we all know that local authorities are FOI-able. Equally, we all know that when we submit freedom of information requests to local authorities, we are not able to see the personal reports on individual members of staff in those authorities. The Act does not give access to that kind of personal information, and I should have thought that the same approach would exempt the private banking work of the Bank of England.
As for monetary policy and financial operations, I do not believe that my new clause would run into those parts of the Bank’s work, because they would still be protected by section 29(1) of the Act. That section states:
“Information is exempt information if its disclosure under this Act would, or would be likely to, prejudice…the economic interests  of the United Kingdom or any part of the United Kingdom, or…the financial interests of any administration in the United Kingdom, as defined”,
blah blah blah. I should have thought that as long as we were not amending section 29, we would be able to protect the areas about which the Minister was particularly concerned.
I was alerted to this matter by a letter from the Governor, which the Minister herself waved at us in the Chamber last June, about the sale of shares in the Royal Bank of Scotland. I am sure that the Minister remembers the occasion well. In his letter, the Governor said that
“it is in the public interest for the government to begin now to return RBS to private ownership”.
Writing that letter was not part of the Governor’s role on monetary policy, financial policy or prudential policy; it was an intervention in Government policy at the Chancellor’s request on the issue of a share sale.
When the Governor appeared before the Treasury Committee, I asked him whether he would share the analysis that underlay the letter that he had written. He refused point blank to do so. I am not going to read out the full exchange that I had with the Governor on that occasion, because I went into the matter in detail on Second Reading and it has now been placed on record twice. However, I really feel that in refusing to provide that underlying analysis, the Governor is evading public scrutiny of what is a perfectly proper matter for the public to understand.
The Governor also said in his letter that
“a phased return of RBS to private ownership would promote financial stability, a more competitive banking sector, and the interests of the wider economy.”
In fact, none of that is true. It will not promote a more competitive banking sector. We are hoping that the Comptroller and Auditor General will, in his separate audit of the RBS share sale, secure that analysis. However, there should be a more straightforward way of dealing with this. The share sale is a particular issue and the Comptroller and Auditor General always looks into share sales, so we might get at the truth on this one occasion, but I am sure that there will be other similar loopholes.
The topicality of seeing this analysis was further underlined last week by the interview in the Financial Times given by Sir Nicholas Macpherson on the occasion of his retirement from the Treasury, in which he described the sale of more RBS shares as “tricky”. He went on to say that there was a judgment to be made over whether to sell further shares below the 2008 purchase price. These are not straightforward matters; they do not fall within the normal remit of the Bank of England and they are of public policy significance. They are but one example of why it is appropriate for the Bank of England to be subject to the Freedom of Information Act.

Phil Boswell: Like many others in the Chamber and, as is clear, in the Treasury Committee, I welcome progress but have serious concerns about the Bill and, in particular, its role in the systematic gradual compromising of the independence of the two key regulators, the FCA and the Prudential Regulation Authority. Further to the Minister’s announcements in her opening remarks, which were touched on by many in this House, including my hon. Friend the Member for East Lothian (George Kerevan), I welcome the Government’s determination that more oversight is needed on the appointment of the chief executive of the FCA by the Chancellor. However, I have concerns about the new procedures, as  announced. Until this legislation is in place, this is very much open for debate and I sincerely hope we will debate it thoroughly, in the way described by my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin).
Another consideration is this: if the Treasury Committee recommends the appointment to be put forward as a motion to the House, the Government could simply whip votes to approve the Chancellor’s appointment. Select Committees provide substantially more apolitical deliberation of key specialised issues. For that reason, a direct Treasury Committee veto of the appointment needs to be considered.
Issues around Treasury Committee approval are even more pertinent given the controversy surrounding the appointment of the newest chief executive of the Financial Conduct Authority, Andrew Bailey, which was touched on by the right hon. Member for Chichester (Mr Tyrie). Before his appointment, Mr Bailey was the deputy governor of the Prudential Regulation Authority. Mr Bailey’s move between the two regulators, at the recommendation of the Chancellor, raises questions over whether a revolving door policy may exist. As many in this Chamber learnt in the wake of the 2007-08 financial crisis, separation of Church and state is of paramount importance when it comes to regulation of the banks. I fear that the current Conservative Government are ignoring that critical point.
One may wonder about the motivation of the appointment of Mr Bailey as chief executive of the FCA, given that his predecessor, Martin Wheatley, was allegedly forced out of the job by the Chancellor for reportedly being perceived as too tough on financial institutions. A lighter-touch approach to regulation could mean that selling Government shares in Lloyds Banking Group and Royal Bank of Scotland would be, shall we suggest, less troublesome for the Chancellor, particularly given the recent capping on losses from the mis-selling of the pay protection scandal.
As I have previously said in this Chamber, the Chancellor stated in the 2016 Budget that he expects the Government to be able to sell their share in RBS for £25 billion, despite the fact that the bank arranged £9.3 billion in high-yield energy loans between 2011 and 2014 alone and the fact that its share price currently stands at roughly half of what was paid for it by the taxpayer in 2008. Clearly, the Chancellor faces serious challenges.
Two clauses in the Bill as outlined are particularly detrimental to the maintenance of the independence of regulators from Government influence, which is well covered by Members in this House. In part 2, clause 18 states that the Treasury is required to make recommendations for the FCA regarding economic policy as it pertains to the advancement of the objectives of the regulator at least once per year. Similarly, in part 1, clause 13 states that the Treasury can at any time—although it is required to do so at least once per year—make recommendations to the Prudential Regulation Committee regarding economic policy as it pertains to the objective of the PRA, which is the maintenance of stability within the financial sector.
Although those recommendations made by the Treasury to the regulators are not binding, it is clear that they increase the level of political involvement in the function  of the regulators, which at their inception were intended to be independent of political influence. Given recent speculation that the FCA bowed to political pressure when it abandoned a probe into banking culture in the UK at the end of 2015, these two clauses, and the greater political influence on the independent regulators they entail, are concerning to say the least. In particular, the requirement in clause 13 that the Treasury make recommendations at least once a year to the PRC creates a greater onus of responsibility on the Treasury to remain aware of systemic risks in the financial system. I fear that, given the track record of this Government, they may well be asleep at the wheel when it comes to management of systemic risk.
As I have mentioned previously in this Chamber, during the debate on the 2016 Budget, this UK Government has thus far failed to address a source of substantial systemic risk inherent in the financial system and the wider economy—that of leveraged lending to the oil and gas sector by British banks and US banks active in the UK market, and the slice and dice repackaging of these loans into derivative products, such as collateralised loan obligations, which are then sold to investors.
Numerous publications have warned that, with the stagnating price of oil at the moment, that structure poses serious risk, with the Financial Times reporting in December 2014 that
“there is a stark parallel with the US property market collapse that heralded the start of the 2008 global financial crisis and upended banks along the way.”
There are already signs that the first dominoes may be falling, as default rates on these high-yield loans are rising at a startling rate. Wells Fargo announced just this month that 57% of the loans in its energy portfolio were categorised as at risk of default. As Wells’ energy exposure stands at $42 billion, $24 billion, based on that figure, is at risk of default. UBS analysts have since put a sell notice on Wells’ stock.
Notably, it is reported by Lynn Adler at Reuters that in the United States the Federal Reserve has stepped up its review into lending which could lead to systemic risk, due to concerns about leveraged lending in the oil and gas sector. The systemic risk involved in such lending has been ignored by the Conservative Government here, however.
Political influence on the regulators was a key factor, as mentioned by my hon. Friend the Member for Kirkcaldy and Cowdenbeath earlier, in the failure of the regime to protect the financial sector and the wider economy from the systemic risk that led to the 2007-08 financial crisis. The Government have already demonstrated that they are unable even to acknowledge systemic risks that are apparent to so many in the industry today.
In a final point on the composition of the court of directors of the Bank of England, if the Government truly believe in one-nation Conservatism, new clause 2, as tabled by my hon. Friend the Member for East Lothian, should be incorporated into the Bill. Finally, the Bill, as outlined, has serious potential to weaken the UK regulatory regime and compromise the independence of the regulators, bringing us back to a system wherein banks are seen as too big to fail—otherwise known as business as usual.

Harriett Baldwin: I think that there are a range of different ways in which that can happen, particularly now that the Treasury Committee in this House has a member from Scotland, and of course we all welcome the fact that the very coins in our pockets are minted in the great country of Wales.
The hon. Member for Carmarthen East and Dinefwr identified the Federal Reserve as an example of a central bank that adopts a dual mandate. US policy makers have judged that that is right for them. We believe that the primacy of price stability is important for anchoring inflation expectations, and we are joined in that belief by other central banks, including those in Canada and New Zealand and the European Central Bank.
I am pleased to have had this opportunity to respond to a range of issues raised in this part of the debate. I commend the Government’s new clause to the House and hope that it will agree to include it in the Bill.
Question put and agreed to.
New clause 12 accordingly read a Second time, and added to the Bill.
New Clause 2

Composition of the Court of Directors of the Bank of England

“In making nominations to the Court of Directors of the Bank of England, the Chancellor of the Exchequer must have regard to the importance of ensuring a balanced representation from the nations and regions of the United Kingdom.”— (George Kerevan.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
The House divided:
Ayes 246, Noes 303.

Question accordingly negatived.
New Clause 9

Money laundering

Money Laundering

Gary Streeter: I should like to take this opportunity to introduce my new clause 10, which is aimed at safeguarding the free debt management sector. Let me reassure the Minister that this is very much a probing amendment; I know she is looking forward to responding to it.
There has been a long debate over the “fee versus free” principle in the provision of debt management plans for indebted consumers. It is not my intention to re-open that debate now, although my concern is about free providers that are facing a looming capacity crisis.
Organisations such as PayPlan and Christians Against Poverty operate the “fair- share” model of free debt management that sees creditors covering the cost of customer plans on a polluter-pays basis—in other words, through schemes that are free to the debtor. These organisations are facing increasing pressure as a consequence of fee-charging firms leaving the marketplace after failing Financial Conduct Authority authorisation. In one recent case, this left 16,000 debt management clients unsupported, and these customers are now being are being signposted to free providers. The last thing people want to happen when they are caught up in the desperation of heavy debts and are trying to slog their way out of it is, of course, that the person advising them suddenly disappears so that they have to start again with new people.
The debt management sector is nearing a desperate point, and the market is becoming increasingly inefficient, with consumers treated badly in many cases. The fair-share operators I mentioned have seen their revenue reduce as a consequence of consumers’ disposable income falling. As more and more fee chargers leave the market, we will soon face a situation in which fair-share operators are unable to provide economically viable plans. Plainly, we now face a situation in which consumers will be charged higher fees and their options for free debt management services will be severely limited—again, we are going in the wrong direction.
There were considerable and commendable efforts over the course of the last Parliament aimed at safeguarding free debt management provision, most notably on the creation of a voluntary protocol. Members of all parties have tried to make similar long-term changes, reflecting the cross-party nature of this issue. More recent efforts have come from the parliamentary debt management working group, of which I am a member. I see in her place our chairman, the hon. Member for Makerfield (Yvonne Fovargue), who is poised to speak in, I hope, support of my new clause.
Recent efforts have been aimed at establishing an industry-wide offering of free consumer debt management services. I accept that, while desirable, such an approach may not be feasible at this time. The new clause provides for a small tweak to the Financial Services and Markets Act 2000, mandating all creditors, via an FCA rule change, to fund free-to-consumer debt management plans under the “fair share” model. Many large creditors—banks and credit card companies—do accept a reduction  in the amount due in exchange for the establishment of a coherent plan, but some still do not, and the new clause is intended to tackle that. While it falls short of outlawing the provision of fee-charging plans, it provides a strong safeguard for the “fair share” model, ensuring that customers can continue to access free debt management plans.
I am certain that this is a robust mechanism for desperately needed reform in the debt management sector, and I hope that, subject to Members’ approval, it can be implemented without delay. I thank the Economic Secretary for her interest in the matter, and for her helpful guidance behind the scenes.
Every age has its challenges, and it may well be that historians will look back at our era and marvel at the levels of unsustainable personal debt that were carried by so many people. Such debt may arise from grave misfortune, poor choices or the actions of others, but whatever the reason, it is vital that the right help is at hand to help people to step their way out of debt, and the FCA can assist that process by making the rule changes I have proposed. I thank the Economic Secretary again for her patience and kindness, and commend the new clause to her and to the House.

Richard Burgon: I rise to speak to new clause 14, amendment 8, and amendments 9 and 10, which are consequential on amendment 8, tabled in my name and those of my hon. and right hon. Friends. I will first discuss new clause 14 on combating abusive tax avoidance arrangements and then our amendment on the reverse burden of proof, or the presumption of responsibility, as I choose to call it, for senior managers in the banking sector.
Labour tabled new clause 14 in the wake of Panama papers leak, which the hon. Member for East Lothian (George Kerevan) just mentioned. The new clause sets out that combating abusive tax avoidance should be established as new regulatory principle for the FCA, and requires the FCA to
“undertake, in consultation with the Treasury, an annual review for presentation to the Treasury into abusive tax avoidance”.
The new clause makes it clear that the new principle should involve
“measures to ascertain and record beneficial ownership of trusts using facilities provided by banks with UK holding companies or entities regulated by the Bank of England or the FCA, control of shareholders and ownership of shares, and investment arrangements in an overseas territory outside the UK involving UK financial institutions.”
Members will be aware that Labour published its tax transparency enforcement programme following the Panama papers leak, and the release of the information that thousands of companies listed in the Mossack Fonseca papers have financial services provided by UK banks. Our programme makes it clear that Labour will
“work with banks to provide further information over beneficial ownership for all companies and trusts that they work for.”
The new clause seeks to establish a procedure to enact that.
Last week, the Government announced a deal on the global exchange of beneficial ownership. We of course welcome that as an initial step, but it is insufficient. The measures announced by the EU this week are also welcome, but they do not go nearly far enough, because they require only partial reporting. My hon. Friend the shadow Chancellor said last week:
“The turnover threshold is far too high, and Labour MEPs in Europe will be”
doing the right thing in
“pushing to get that figure reduced much lower to make it more difficult for large corporations to dodge paying their fair share of tax.”—[Official Report, 13 April 2016; Vol. 608, c. 369.]
Banks need to reveal the beneficial ownership of the companies and trusts with which they work. That means establishing a record of ownership of the companies and trusts supported by UK banks, whether or not the owners are resident in the UK. We must ensure that Crown dependencies and overseas territories enforce far stricter minimum standards of transparency for company and trust ownership, but when UK banks are involved, it is right that a record is maintained of the beneficial owners that they advise.
The tax expert Richard Murphy has written that Jersey, Guernsey and the Cayman Islands are
“cock-a-hoop at having rebuffed calls from David Cameron that they must have readily accessible registers of beneficial ownership even for the use of UK law enforcement agencies”.
The shadow Chancellor said in response to those calls that the
“agreement is a welcome step in the right direction but it fails to do anything to tackle the tax havens based in British Overseas Territories. Failure to take responsibility for these British Dependencies substantially undermines the effectiveness of this agreement.”
Similarly, we are aware that the Financial Conduct Authority wrote to banks urging them to declare their links to Mossack Fonseca by 15 April. The FCA’s call on UK financial institutions to review links with Mossack Fonseca is welcome, but the regulator should recognise the need for complete transparency to retain public confidence.
The FCA should seek full disclosure and act without delay. The slow, drip-drip responses of the Prime Minister’s office in recent weeks have served only to fuel public concern and have been very much a lesson in how to raise suspicion unintentionally. The FCA should publish details of which financial institutions it has written to and why; what information it has asked them to provide; and what action it will take, now that the 15 April deadline has passed. Importantly, it cannot allow banks and their subsidiaries to conduct an open-ended internal investigation, but must establish an early deadline for the disclosure of all information on their relations with Mossack Fonseca, so that the regulator can take all necessary action. Campaigners Global Witness responded by saying:
“These are welcome first steps…but the UK authorities are missing the wider point. Mossack Fonseca is no bad apple; it is just one small part of a much deeper problem.”
That is why it is necessary for us to have a clear direction of travel towards recording beneficial ownership of trust services by UK banks, as we are seeking to do with this new clause.
Given the widespread concerns about tax avoidance, the British public, who bailed out the country’s banking sector, deserve to know the facts about the role of UK banks in this unfolding story. With new clause 14,  Labour has made a positive and practical proposal to take steps to increase tax transparency and publicly available information on the beneficial owners of companies and trusts registered in tax havens.
Let me now deal with the remainder of the amendments. Labour’s position was set out clearly on Second Reading and in our amendments in Committee: removing the reverse burden of proof—the presumption of responsibility—is unreasonable, unwise and, I am sorry to say, risky. We continue to support the current legislation, which was agreed by the Chancellor and in both Houses as recently as in consideration on the Financial Services (Banking Reform) Act 2013. That is why we have re-tabled our amendments on keeping the presumption of responsibility. It should not be forgotten that this measure was a key recommendation of the Parliamentary Commission on Banking Standards, which said that it
“would make sure that those who should have prevented serious prudential and conduct failures would no longer be able to walk away simply because of the difficulty of proving individual culpability in the context of complex organisations.”
The presumption of responsibility, as currently set out in legislation, applies to senior managers. It means that to avoid being found guilty of misconduct when there has been a regulatory contravention in an area for which they are responsible, they will have to prove that they took reasonable steps to prevent that contravention. This Bill removes that onus on senior bankers. The onus is entirely reasonable, proportionate and, as bitter experience tells the British people, necessary. Misconduct and misdemeanours in financial services are not merely a tale from history. In 2015, for example, the FCA had to fine firms more than £900 million, and we have also seen the LIBOR scandal, foreign exchange fines and the mis-selling of payment protection insurance to the value of up to £33 billion. The presumption of responsibility is so reasonable and necessary that the policy was introduced with cross-party support; that should not be forgotten.
The 2013 Act applied the presumption of responsibility, through the senior managers and certification regime, to all “authorised persons”. This Bill extends that authorised persons regime to a wider range of businesses but has watered down the presumption of responsibility to a mere “duty of responsibility”. The vast majority of people working in the financial sector were not, and are not, affected by the existing legislation, and would remain unaffected should our amendment pass. That is why the legislation was passed by Government Members in the first place.
In December 2013, speaking of the stricter measures being introduced by the Government, including the reverse burden of proof, the then Economic Secretary to the Treasury, the right hon. Member for Bromsgrove (Sajid Javid), said:
“The introduction of this offence means that…in future those who bring down their bank by making thoroughly unreasonable decisions can be held accountable for their actions…Senior managers could be liable if they take a decision that leads to the failure of the bank…The maximum sentence for the new offence…reflects the seriousness that the Government, and society more broadly, place on ensuring that our financial institutions are managed in a way that does not recklessly endanger the economy or the public purse.”—[Official Report, 11 December 2013; Vol. 572, c. 252.]
On that, at least, I agree with the right hon. Gentleman. It is a shame that there has been a change in position.
The Chair of the Treasury Committee said:
“Far from imperilling the UK’s global competitiveness, high standards will make the UK a more attractive place to locate.”—[Official Report, 8 July 2013; Vol. 566, c. 76.]
Other commentators and campaigners who have expressed their support include Martin Wolf of the Financial Times. We have re-tabled this amendment to state our clear opposition to this unwelcome, unnecessary and risky change.
The legislation was introduced by the Chancellor in 2013, and Members of the House should not forget that it was due to come into force in March this year. It has yet to be even tested, as the hon. Member for East Lothian said. Now is not the time to make this concession to top bankers. Both the announcement of the Chancellor’s “new settlement” with financial services—including as it does the departure of Martin Wheatley from the FCA and the scrapping of the FCA’s review of banking culture—and the recent discovery that UK banks, Crown dependencies and overseas territories are at the heart of the Panama papers tax haven scandal mean that the proposal in the Bill to remove the presumption of responsibility is the wrong proposal at the wrong time. We urge Members to support our amendment.
Let me turn to new clause 10, which was tabled by the hon. Member for South West Devon (Mr Streeter). We recognise the concern about fee-chargers in the debt management sector, who often charge clients exorbitant amounts to set up plans that can clearly add to clients’ problems, rather than helping to alleviate them. In the scenario proposed, instead of charging fees to customers, the commercial debt management companies would receive income though a statutory levy on creditors, and all creditors would be bound by a fee arrangement to which the majority agree. However, it is not clear how that helps consumers specifically. The rules could bind some commercial organisations to paying fees to other ones. There are serious competition issues here, and I am aware of the FCA’s concerns on that point.
There are questions to ask about how the creditors set the level of fees. The measures would not stop commercial debt management companies charging consumers in addition to the fee. In some circumstances, they could lead to commercial providers advising people on the basis of their creditors and not on their actual needs.
Although the new clause can be admirably presented as a way of killing off fee charging, it may well result in a lifeline being thrown to the sector. Critics may well ask why the Government should intervene to prop up this market, just at the point when the FCA is cleaning it up. Secondly, it introduces a statutory funding mechanism for one debt solution—debt management plans—when in fact there are many options available for people in debt, including bankruptcy, debt relief orders, debt management plans, administration orders, debt consolidation and individual voluntary arrangements. Only about one third of those people seeking debt advice are provided with a debt management plan; for others, it is simply not the right fit. Although we welcome the debate, we feel that it is necessary to consider how best we meet the needs of all people with debt problems, so we do not support the new clause.
Finally, let me turn to new clause 9 in the name of the hon. Member for Broxbourne (Mr Walker). I am aware that this is an issue of concern to Members in all parts  of the House. The global rules against money laundering require banks and regulated businesses to carry out enhanced due diligence on all politically exposed persons—individuals entrusted with a public function—but if the transposition of the EU directive into domestic legisslation is mishandled, a wide range of other people could be affected. It could adversely affect tens of thousands of people, including civil servants, city workers and even, as has been described, the families of armed forces officers serving our country abroad.
The EU’s fourth money laundering directive, passed last year, will need to be transposed into UK law within two years, as has been mentioned. We need to get this right to ensure that the safeguards proposed to prevent tax avoidance and money laundering and, in the light of the Panama papers, the provisions governing the register of beneficial ownership of companies and trusts do not get in the way of individuals using their bank accounts, securing mortgages or supporting charities. We believe that this is an important issue, and we are grateful to the hon. Member for Broxbourne for all his hard work explaining the potential risks to the House.

Harriett Baldwin: Let me start with new clause 9, tabled by my hon. Friend the Member for Broxbourne (Mr Walker) and others, which addresses the important issue of politically exposed persons. My colleague is an expert not only in oratory but in parliamentary procedure and I commend him for his use of both in this example. The Chancellor and I are very concerned about this issue, as my hon. Friend knows, and we are grateful to my hon. Friend for his assiduous work in collating examples that he has heard from colleagues and from the banking sector.
It is absolutely right that the “know your customer” requirements should be tailored to the risk posed, and I reassure the House that we are very much on the side of colleagues in this regard. I therefore welcome the amendment and the strong message it sends to banks as they implement these rules. The new clause also addresses guidance, and I fully agree that guidance will help the banks to take an effective, proportionate and commensurate approach to politically exposed persons. The Government intend to implement new money laundering regulations by June next year at the latest and this amendment will come into force at that time. We will consult on the new regulations this year.
As well as accepting the new clause, I want to take the opportunity to update the House on other action that we have taken to resolve these issues on behalf of Members since my hon. Friend had his Adjournment debate on 20 January. On 1 March we had a meeting with the banks that I organised with the Minister for Security from the Home Office, and on 23 March the Chancellor wrote to the banks to explain our views. We will continue to work with the banks, with the FCA and with others to ensure that a sensible and proportionate approach prevails.
I have also written not once but twice in a “Dear colleague” letter to all Members and Peers giving colleagues the name of a senior designated person to contact at each major bank should they or a family member encounter any problems. To conclude on this new clause, I thank my hon. Friend for bringing the issue to the House so that I can give this reassurance about the attention that the Government are paying to this challenge.
New clause 10, on debt management plans, was tabled by my hon. Friend the Member for South West Devon (Mr Streeter), and I thank him for his collaborative approach in tabling the amendment and the ongoing commitment shown by him and his all-party group to supporting all households in problem debt. The Government share his concerns about the potential for detriment to occur to consumers participating in some debt management plans and I recognise the importance of protecting this vulnerable group of consumers. The Government’s focus has been on comprehensively reforming the regulation of the sector to ensure that financial services firms are on the side of people who work hard, do the right thing and get on in life. Responsibility for regulating debt management firms, like that for all other consumer credit firms, transferred from the OFT to the FCA on 1 April 2014. The FCA has made addressing the risk posed to consumers by non-compliant debt management firms the highest priority, alongside payday lending.
Indeed, debt management firms were in the first group of firms to require full authorisation, and the FCA is thoroughly scrutinising firms’ business models and practices. Firms that do not meet the FCA’s threshold conditions will not be able to continue to offer debt management plans. Removing non-compliant debt management firms from the market will fundamentally reduce the risk of harm to consumers and will ensure that consumers have access to sustainable repayment plans as a result of providers acting in the best interest of consumers.
The hon. Member for Makerfield (Yvonne Fovargue) raised the question of the handover of clients with debt management plans whose firms have not been authorised by the FCA. That is an issue to which the FCA is playing close attention, to try to ensure that data protection issues are taken into account and to accommodate the disheartening position of someone with one of those plans whose firm fails to be authorised, for whom a better alternative must be found.
On the issue raised by the amendment—how debt management plans are funded—charities such as StepChange and Christians Against Poverty already successfully negotiate voluntary funding agreements with creditors through the fair share model. Introducing changes to this funding arrangement, such as mandatory contributions, may have unintended consequences, disrupting a successful funding arrangement for charities. Consequently, setting the level of this share is not supported by the not-for-profit sector. Similarly, not-for-profit providers are concerned that formalising fair share contributions may change charities’ relationship with creditors and compromise their independence. The perception of charities by their clients as impartial advocates is essential to encouraging households in problem debt to come forward for support.
With the FCA’s authorisation process ongoing, and the anticipated changes in the market that that will bring, now is not the right time to introduce changes to the way debt management plans are funded. Any consideration of changes to funding arrangements should take place when the shape of the debt management market is known. The best setting for looking at the full landscape of debt advice funding will be in the context of the public financial guidance review, which includes a commitment for the Government to monitor the  impact on the FCA authorisation process. If necessary, the funding arrangements for debt advice will be reviewed, and the Government may consider broadening the funding base to include other sectors, to ensure that consumers continue to get the help they need. I trust that this assures my hon. Friend the Member for South West Devon that the Government continue to consider it a priority to help those facing problem debt, and that he will not press his amendment to the vote.
I shall deal now with amendments 1, 2, 8, 9, and 10, which would apply the reverse burden of proof to senior managers in the banking sector or in all authorised financial services firms. We reject both sets of amendments, above all because the senior managers and certification regime with a statutory duty of responsibility will be an extremely effective tool for holding senior managers to account.
The duty of responsibility will extend to all senior managers. The discredited approved persons regime will be replaced. Firms must identify exactly what their senior managers are responsible for. Senior managers will not be able to wriggle off the hook because they did not know what was being done in the areas for which they are responsible. The reverse burden of proof is not needed to deliver what we want to deliver—a culture change.
Lord Turnbull, who was a Cross-Bench member of the Parliamentary Commission on Banking Standards, said:
“In future, senior managers will have to take responsibility for what goes on in the teams for which they are responsible and for the actions of the people whom they have appointed and thereby given accreditation.”
He went on to say:
“I still fail to see why the reverse burden of proof is the only way to get people to understand that. . . I believe that the proposal now in the Bill—
that is, the duty of responsibility—
is superior.”—[Official Report, House of Lords, 15 December 2015; Vol. 767, c. 2026-28.]
In written evidence to the Public Bill Committee, the Building Societies Association stated:
“The lack of individual accountability to date is mainly the result of a failure to allocate responsibilities in firms’ corporate governance frameworks. Because this deficiency will be fully addressed by the new strengthening accountability in banking rules (through responsibility maps, individual statements of responsibility, handover arrangements), the reversed burden of proof is unfair and is redundant.”—
not my words, but those of the Building Societies Association.
Today’s debate is about what happens when things go wrong and a firm breaks a regulatory requirement. Under the reverse burden of proof, the senior manager responsible for the area of the firm where the breach occurred would have to prove that they had taken reasonable steps to prevent it. The Bill will impose a statutory duty of responsibility on senior managers. Senior managers would still be required to take reasonable steps to prevent breaches of regulations in the areas of the firm’s business for which they are responsible. However, when such a breach occurs, it will fall to the regulators to show that the responsible senior manager had failed to take such steps. This duty will be extended with the senior managers and certification regime to senior managers in all authorised financial services firms, ensuring that they are held to the same high standards as those in banks.
Contrary to the allegations of the hon. Member for Leeds East (Richard Burgon), the duty is in no way “soft” on bankers. A senior manager can be found guilty of misconduct if a breach of regulatory requirements occurred in the area of the firm’s business for which they are responsible and they did not take reasonable steps to prevent it, whether they were aware of the contravention or not. The hon. Gentleman quoted a previous Economic Secretary, my right hon. Friend the Member for Bromsgrove (Sajid Javid). I think that he might be confusing the reverse burden of proof with the criminal offence of recklessness causing a bank to fail. I can assure him and the House that that criminal offence, with a possible seven-year sentence attached, came into effect in March.
New clause 14 seeks to give the FCA and PRA a statutory duty to have regard to combating tax avoidance, and for them to report annually to the Treasury. I welcome the opportunity once again to set out the measures that this Government have taken—far more than any previous Government—to tackle tax evasion, tax avoidance and aggressive tax planning. We have become a world leader in tax transparency. However, as the UK tax authority is Her Majesty’s Revenue and Customs, rather than the FCA or PRA, it is responsible for ensuring that businesses and individuals pay the taxes they owe.
Last week we set out a far more effective package of proposals to tackle the problem of tax evasion and avoidance, ensuring a multi-agency approach by strengthening HMRC and involving relevant bodies such as the FCA. The Government are committed to giving HMRC the tools to do its job, whether by introducing over 40 changes to the tax laws, or by providing additional funding to strengthen its capability in key areas. I could go on, Madam Deputy Speaker, about all the measures we have introduced—

Harriett Baldwin: Okay, the hon. Gentleman wants to hear more. In the July 2015 Budget we confirmed an extra £800 million investment to fund additional work to tackle evasion and non-compliance. HMRC’s specialist offshore unit is currently investigating more than 1,100 cases of offshore evasion around the world, with more than 90 individuals subject to current criminal investigation. Even before last week, HMRC had already received a great deal of information on offshore companies, including in Panama, and including Mossack Fonseca. This information comes from a wide range of sources and is currently the subject of intense investigation.
We are going further by providing new funding of up to £10 million for an operationally independent cross-agency taskforce. It will include analysts, compliance specialists and investigators from across HMRC, the National Crime Agency, the Serious Fraud Office and the Financial Conduct Authority. It will have full operational independence and will report to my right hon. Friends the Chancellor and the Home Secretary.
Of course the FCA has a role to play. Its 2016-17 business plan states that the fight against financial crime and money laundering is one of its priorities. Its  rules require firms to have effective systems and controls to prevent the risk that they might be used to further financial crimes. That is why the FCA has written to financial firms asking them to declare their links to Mossack Fonseca. If it finds any evidence that firms have been breaking the rules, it already has strong powers to take action. However, it is HMRC that is ultimately responsible for investigating and prosecuting offences associated with tax evasion.
Finally, with regard to trusts, we believe that we have secured a sensible way forward by ensuring that trusts that generate a tax consequence in the UK will be required to report their beneficial ownership information to HMRC. By focusing on such trusts, we are focusing on those where there is a higher risk of money laundering or tax evasion, which arise when trusts migrate or generate income or gains, and minimising burdens on the vast majority of perfectly ordinary and legitimate trusts.
Although I appreciate the spirit with which the new clause has been tabled, I do not believe that it would be appropriate to change the role of the FCA or the PRA, so I urge the hon. Member for Leeds East not to press the new clause.
Question put and agreed to.
New clause 9 accordingly read a Second time, and added to the Bill.
New Clause 14

Combating abusive tax avoidance arrangements

“(1) Section 3B of the Financial Services and Markets Act 2000 (Regulatory principles to be applied by both regulators) is amended as follows.
(2) At the end of subsection (1) insert—
(i) combating abusive tax avoidance arrangements.
(a) in observing principle (i), the regulators must undertake, in consultation with the Treasury, an annual review for presentation to the Treasury into abusive tax avoidance, including measures to ascertain and record beneficial ownership of trusts using facilities provided by banks with UK holding companies or entities regulated by the Bank of England or the FCA, control of shareholders and ownership of shares, and investment arrangements in an overseas territory outside the UK involving UK financial institutions.
(b) in this section “beneficial ownership of trusts” includes ownership of any equitable interest in a trust including being an object of a discretionary trust, power of appointment or similar arrangement as well as any vested interest under a trust;
(c) “control of shareholders and ownership of shares in companies using facilities provided by banks with UK holding companies or entities regulated by the Bank of England or the FCA” shall include control by any person with control over a voteholder in a company as defined in Part VI Official Listing s.89F of the FSMA (2000) as applied mutatis mutandis to this context, whether directly or indirectly, and whether alone or in concert with some other person.””—(Richard Burgon.)
Brought up, and read the First time.
Question put, That the clause be read a Second  time.
The House divided:
Ayes 245, Noes 299.

Question accordingly negatived.
Clause 24

Misconduct

Amendment proposed: 8,page20,line10, at end add
“and insert—
‘(6) Where the authorised person mentioned in subsection (5) is a relevant authorised person, as defined under section 71A of the Financial Services and Markets Act 2000, subsection (5)(d) does not apply and subsections (7) and (8) do apply.
(6A) If the FCA satisfies itself that a person (P), who is a senior manager in relation to a relevant authorised person, is guilty of misconduct by virtue of subsections (5)(a)-(c), then P shall be guilty of misconduct, subject only to subsection (8).
(6B) But P is not guilty of misconduct by virtue of subsections (5)(a)-(c) and (7) if P satisfies the FCA that P had taken such steps as a person in P’s position could reasonably be expected to take to avoid the contravention occurring (or continuing).””—(Richard Burgon.)
Question put, That the amendment be made.
The House divided:
Ayes 246, Noes 300.

Question accordingly negatived.
Clause 36

Banks authorised to issue banknotes in Scotland and Northern Ireland

Jonathan Edwards: I beg to move amendment 4,in clause 36, page34,line15, at beginning insert—
‘( ) Subject to the provisions of subsection (3A).”
This amendment and amendment 5 would enable Lloyds Banking Group, the holder of the Bank of Wales trademark, to issue banknotes in Wales.

Lindsay Hoyle: With this it will be convenient to discuss amendment 5,page34,line44, at end insert—
‘(3A) Regulations under subsection (1) must make provision authorising Lloyds Banking Group to issue banknotes in Wales”.
See the explanatory statement for amendment 4.

Jonathan Edwards: I am grateful to my parliamentary leader for his intervention. He is completely right, and that is why four banks in Northern Ireland and three in Scotland have continued the practice. There is a commercial interest for Lloyds, but also a public interest due to our part ownership of the bank.
Permission to issue Welsh banknotes would be a welcome boost to brand Wales, recognising our country as an equal and economic entity. Notes in Northern Ireland celebrate individuals such as J.B. Dunlop, Harry Ferguson and James Martin, as well as architectural splendour such as that of Belfast city hall. Notes in Scotland pay tribute to that country’s fantastic bridges and recognise the contribution of people such as Sir Walter Scott and Robbie Burns. Notes currently used in Wales recognise people such as Elizabeth Fry, Adam Smith and Matthew Boulton, and previous notes have portrayed Charles Dickens, Michael Faraday, Sir Isaac Newton, William Shakespeare, George Stephenson and the first Duke of Wellington. They are all great people, but none, to my knowledge, has anything to do with my country.
Is it not fair and sensible for us in Wales to use notes that recognise our historic landmarks, such as the incredible Castell Carreg Cennen in my constituency, Pont Menai, Yr Wyddfa—Snowdon, the largest mountain in our country—and our historic greats such as Owain Glyndwr, who was nominated the seventh most important person of the last millennium by The Times, of all papers? There is also David Lloyd George, the originator of the welfare state, Aneurin Bevan, the architect of the NHS, and Gwynfor Evans, the first Plaid Member of Parliament and the father of modern Wales.
A case could also be made for what is arguably the most famous Welsh painting of all: “Salem”, painted by Sydney Curnow Vosper in 1908. His painting of Siân Owen aged 71 at Capel Salem, a Baptist chapel at Pentre Gwynfryn in the north of Wales, is a national icon, much as Constable’s “The Hay Wain” is in England. The Royal Mint already produces Welsh-specific coins, so my proposals raise no major issue of principle—indeed, the Minister referred to the Royal Mint earlier in the debate.
A national poll by ITV Cymru/Wales found that more than 80%—indeed, it was 82.6% when I looked at the website today—of the Welsh public supported these calls. If we are unsuccessful in the Division, I hope that the UK Government will support Plaid Cymru in putting right this historical anomaly and bring forward their own proposals.

Hywel Williams: I have a Welsh pound coin with me, but it reeks of nationalist propaganda because around the edge it states “Pleidiol wyf i’m gwlad”, which means “True am I to my country”. I certainly agree with that, but it is issued by the Royal Mint.

Harriett Baldwin: That is the very point that I was about to make. The amendment seeks to confer the right to issue commercial banknotes in Wales—a clear   commercial advantage—on just one bank, Lloyds Banking Group. That appears to be based on a link to a right to issuance that was broken more than 100 years ago. Today, the Government—the taxpayer—owns just under 10% of Lloyds Banking Group. Part of Lloyds Banking Group already has a commercial banknotes issuance operation, which may be why the hon. Member for Carmarthen East and Dinefwr chose to focus on a single bank in his amendment. That is due to the acquisition of the Bank of Scotland operation, which is authorised to issue banknotes in Scotland. However, extending the privilege and the commercial advantage of issuing banknotes in Wales to just one bank would raise competition and commercial issues for others.
I liked the wide range of suggestions about who should be represented on Welsh banknotes, and, as I said earlier, the coins in our pockets are minted in Wales. I appreciate
that the motive behind the amendment—the symbolic issue about which the hon. Gentleman feels so strongly—is to create a symbol, rather than to deal with a pressing economic or practical need for different banknotes.
The Bank of England has already announced that future banknotes, starting with the polymer £5 note which will be issued in September 2016, will include symbols representing all four home nations. For Wales, the imagery will be taken from the Royal Coat of Arms and the Royal Badge of Wales. The Bank recently announced that the design for the £5 note would be revealed on 2 June 2016.
I am very glad that we have had a chance to discuss the merits of the amendment. The hon. Gentleman will understand why I cannot support it. However, I welcome the opportunity to convey the message that an important symbol of Wales will appear on our new banknotes.
Question put, That the amendment be made.
The House divided:
Ayes 239, Noes 301.

Question accordingly negatived.
Proceedings interrupted (Programme Order, 1 February).
The Deputy Speaker put forthwith the Question necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).
Schedule 2

Appointments relating to Part 1

Amendment made: 3, page 49, line 12, at end insert—
‘( ) In paragraph 14 for “submit a monthly” substitute “, at least 8 times in each calendar year, submit a”” —(Harriett Baldwin.)
This amendment changes the frequency with which the Monetary Policy Committee is required to report to the court of directors from once a month to at least 8 times a year. This is because Clause 8(4) replaces a requirement for monthly Committee meetings with one for meetings at least 8 times a year.
Third Reading
Queen’s consent signified.

George Kerevan: We, too, will oppose the Bill on Third Reading. During Treasury questions today, the Chancellor said—I wrote the phrase down, because I was rather taken with it—that he was quite certain that we now have “better and tougher regulation of the financial system.” That is a good test, and it is a good test for this Bill. Do we have tougher regulation? As the law stands this evening, if a senior named manager in a major financial institution discovers that there has been major corruption, wrongdoing and regulatory failure at their bank on their watch, they are culpable unless they can prove to the FCA that they took reasonable steps to stop that happening. As we speak, they would be responsible, and that has been the case for a month and a half.
If we pass the Bill tonight, the situation will change. That manager will no longer be personally responsible. They will be able to argue, “Actually, I ticked all the boxes, signed all the forms, went to all the group therapy sessions with those on my trading floor and told them all to be good boys and girls, but do you know what? They weren’t, and they hid it from me.” And so we will go through the whole cycle again. The law as it stands, as passed by this Government and this Chancellor, makes each individual senior named manager responsible, like the captain of a ship or ferry; if something goes wrong, they are responsible and they cannot claim otherwise. If we pass the Bill, far from toughening the law, we will weaken it.
The only explanation we have heard from the Government is that it is a bit more complicated now because the Bill widens to tens of thousands the number of people who will be designated as responsible people when it comes to identifying who is in charge when something goes wrong. I understand that, but it is perfectly possible, as we tried in Committee, to ring-fence and say that the very senior people in the major banks—the systemically dangerous banks—should be held personally responsible, unless they can prove that they took proper steps. But no, the Government are using the widening of the designated persons regime to weaken and water down the current legislation. That tells me that they are not really serious about being tougher; they are more concerned with getting by.
There was an interesting debate in Committee about transfer vehicles. Those are a bit technical, but they are to do with how the insurance market reinsures itself to  spread risk. There are clauses in the Bill—this is a good thing to put into it—that give the Treasury powers to regulate the use of transfer vehicles in the reinsurance market in a tougher fashion, to use the Chancellor’s key word.
I do not have time to go into detail about what is happening, but insurers can offset some of their risk in the reinsurance market, and they usually do that by selling some of it to specialist wholesale houses, which buy into the risk, but whose capital covers the risk if something goes wrong. Now, the insurance market is instead moving towards reinsuring through specialist vehicles of the kind that got us into trouble in the mortgage market in the lead-up to 2007.
When the issue was discussed in Committee, it was interesting that Ministers argued that we needed to put in place a regulatory framework that made it easier to shift the burden in the reinsurance market away from wholesalers that are capitalised and towards special vehicles using all the financial markets’ tricks of the trade, which led to the disaster in 2007. That said to me that, deep down in the Bill, the Government are up to their old tricks—they want to deregulate and to have less tough regulation, rather than more regulation. On those grounds, the Bill fails the Chancellor’s test, and we should vote against it.
There are good things in the Bill. In particular, we can pride ourselves on the fact that, through the Committee stage and leading up to Report stage today, the Government have been persuaded—I use that word in inverted commas—to take the Treasury Committee’s advice and to set a precedent, in that the FCA’s chief executive will in future be subject, de facto, to having their appointment approved by the Committee and, therefore, by this House rather than the Executive.
That does two things. First, it makes the FCA more accountable, because it is accountable to the House rather than the Executive. Secondly, it protects the FCA from interference by the Executive. That is a good precedent. If it is extended, we will be able to ensure that all the key regulatory bodies and their senior staff are approved by the House and, in particular, that the Governor of the Bank of England is subject to scrutiny and approval by the House, rather than simply appointed by the Executive. That is important because of the large powers that have been transferred to the Bank of England since the crisis of 2007.
However, there are still loose ends, and so I come to the word “better” in the Chancellor’s little homily. Have things got better? They have got a little better, given the ability of the House to protect the FCA and to have a role in appointing its head, and we can take that further into other regulatory bodies. However, there are loose ends at the FCA. Much of the Bill and much of the debate has been about the FCA. In the last instance, the FCA is the consumer’s champion: it regulates how the banks sell. Many of the problems we have had in the last 10 years have been about mis-selling by the banks. Every Member in the House will know we have a number of legacy organisations and legacy campaigns because we have still not put right the mis-selling that has taken place across a range of banks and products since the turn of the millennium.
The FCA is important, and protecting it is important, because, in the last instance, it is the consumer’s champion. A few weeks ago I went to FCA headquarters and had a  meeting with Mr John Griffith-Jones, who is the chairman of the FCA. I put it to him, “You are the consumer champion,” but he demurred. He does not feel that the FCA is the consumer champion. He thinks that that would go too far and that it would be partisan and take up the consumer’s choice. At present, the FCA is still too much the creature of the Treasury. If we want a tougher and better regulatory regime, we have to make the FCA truly independent.
The FCA is getting a new chief executive, but I am not going to offer platitudes and pleasantries. When the new chief executive starts, I think that the chairman of the FCA should consider his position, because I think it also needs a new chairman. We are only starting on the road of making sure that our regulatory bodies are fit for purpose; we have not got there yet.
Finally, many people in Wales, Scotland and Northern Ireland are disappointed that the Government stood on ceremony and decided not to widen the remit of the membership of the core bodies of the Bank of England, starting with its court, to allow proper representation of all of the regions and nations, including the north of England. Most people in this country, and certainly those in the Celtic regions, are long of the view that the Bank of England, the banks and the key regulatory authorities are far too focused on the square mile of the City of London and its needs. We will never have a tougher, better regulatory system unless we widen the remit until the whole of the UK—the individual nations and the regions of England—are represented. Until we do that, the Bank of England is still suspect. That has not been delivered, so there is still a suspicion across the UK that the banking regulatory system operates ultimately in the interests of the bankers, rather than the people. Until that changes, we will not have a better or tougher regulatory system; we will simply have the same old regulatory system dressed up under a different name, and the same old banking crisis will be around the corner yet again.
Question put, That the Bill be now read the Third time.
The House divided:
Ayes 298, Noes 237.

Question accordingly agreed to.
Bill read the Third time and passed, with amendments.

BUSINESS WITHOUT DEBATE

Delegated legislation

PETITION - GREEN BELT LAND BETWEEN GREAT WYRLEY AND CHESLYN HAY

UK CITIZENS RETURNING FROM FIGHTING DAESH

Anne McLaughlin: I thank the hon. Gentleman for allowing me to seek a bit of advice about the highly unusual case of a UK citizen injured fighting the forces of Daesh whom I met in a refugee camp in France. He leading a pretty miserable existence there because he refuses to abandon his wife and baby boy who had to flee Kurdistan, but are not entitled to seek asylum in the UK. The family do not meet the minimum income requirements for spouse visas, partly because of his injuries. How can we help this courageous UK citizen who fought our common enemy, Daesh, and get him and his family out of their miserable existence in the refugee camp in Europe and back here where he belongs?

Robert Jenrick: I completely concur with the Chair of the Home Affairs Committee. It is important that Facebook and others take down not only sites that are actively  recruiting British citizens to fight for IS, but sites that might be preying on naïve and vulnerable Britons who, in their eyes, have decided to do the right thing, but are none the less getting themselves into grave danger.
Some of those individuals, particularly ex-servicemen and women, would be advised not to go to the conflict zone. Few questions are asked by the recruiters and no military experience is required. Health is never checked, and many if not most people arrive at airports such as Sulaymaniyah completely in the dark about what they should expect. They could be kidnapped and held to ransom—who knows?